Friday, 25 November 2011

Alas, Ramamritham is alive , well and strong and he rules upon all that he surveys (pun intended). The Indian Government will announce today in parliament that it would open up the retail sector to foreign investment. No doubt the Left will organise some bandhs, yell at 10,000 decibels in the Lok Sabha, and then this law will be passed while the opposition will walk out en masse.

Ostensibly, this is economic reform. Its a pathetic, 15cms of reform after a decade of nothing happening, but we'll reserve that criticism for another day. What has got my goat is Ramamritham's dirty footprint all across this move.

Firstly foreign investment of 100% will be allowed in Single Brand Retail, but only 51% in multi brand retail. Therefore a Marks & Spencer store can be 100% foreign owned, but Carrefour can't. Even though they may both sell precisely the same things (M&S does sell a lot of food). Pray why ??

Secondly Ramamritham has excelled himself in drafting a series of conditions for allowing even this. Look at some of them

The minimum investment is $100 m. Where he got this figure is unclear. Why not $82.5 m? But at least we can live with this

50% of this $100 m has to be invested in "back end". Then our venerable hero has gone on to clarify that land, rentals and front end stores will not count as back end. No doubt detailed rules on what is back and what is front will be framed. (here is conclusive proof at last that Ramamritham doesn't know his front side from his back side) Lobbyists will work very hard to get IT systems included in back end. But R will qualify that Microsoft Office will not count as back end. Many months of fruitful work and litigation awaits.

30% has to be sourced by these companies from small scale (completely irrelevant if the product is rubbish and the consumer does not want it) No doubt a front small scale company will be set up who will buy the stuff from a big company and then sell it to the retailer to fulfill this quota. R being very smart will then draft rules to stop this. The retailer being equally smart will get a small scale company to buy from a small scale company to buy from a big company ....... and so on.

Stores can be set up only in cities with 1 million population. Lobbyists will work to reduce this number to half a million. They will then lobby that last year Gummidipoondi crossed 1 million population and that R should not wait for another 10 years for the next census but instead pass an interim order allowing the store to be opened there.

How can we get this into Ramamritham's thick skull that we don't want him deciding what is good or bad for us as consumers. Or for the small Indian retailer who he is trying to protect with such quixotic rules. The Indian retailer needs no protection. He is quite a formidable force. Its by no means certain that small retailers will vanish just because Walmart came in - in India the economics of the retail industry, especially the relative high cost of real estate, is such that this is very unlikely.

In any case, how about letting the consumer choose. Rajalakshmi will vote with her feet and purse. She will buy where something is cheaper, better and where she likes to go. She deserves that freedom. Ramamritham should be booted from blocking the way.

PS : For those new to this space, Ramaritham is the mythical, fictional bureaucrat who takes orgasmic pleasure in framing complex, unnecessary and useless rules in order to make lives miserable for ordinary members of the homo sapiens species.

14 comments:

have you noticed that many companies, especially the Multinational types entering India tend to employ very senior Ramamruthams as their advisors/stragegy leaders. Case and point is the number of General Insurance firms in India that have senior folks, GM and above from the original 4 nationalized insurance companies-Oriental, National, United India, New India Assurance. These folks conveniently go on a VRS scheme and then after a year of sabbatical join up these new entrants. Well if Ramamrutham can think of the impossible and formulate rules, these deep pocketed multinationals are one step ahead in the 'can't beat them but will join them' approach. My bet on the first litigation will be on the definition of a city. For example is it Chennai City as defined in the census (Alandur is a separate municipality) or is it Chennai Urban Agglomeration, popularly known as Greater Chennai. Every one of our metros has regular and a "Greater" (Brihan/Brihat in the more chauvanistic cases!)version of their size definition. Help, our bureaucrats are gonna feed more grist to the already creaking and overloaded Judicial Mills - last count about 31Million pending cases all over India. Sorry about a long response but the mention of Ramamrutham involuntarily makes the brain secrete all those chemicals that promote verbosity and the process of achieving orgasmic pleasure through minutiae and legalese.

Sir, on a lighter note - Ramaamirtham's ellam "room pootu zhochikirange". They bring in such complicated, unimaginative laws which is a convienent way to do business in India. I don't know any other country in the world will think like our "Rs"...

On a serious note, let us welcome this move and I personally know how this will bring in a change to the retail sector (having worked for two years in that industry). Consumers / Farmers will get benefited and to me this is a big change towards modern retailing.

But I feel this is also in a way good. It keeps the collective energies of many people put to use. Please remember we are one billion country. Why are you against the good intentions of ramarathinam to improve the gainful employment of many.

On a serious note though It is like my grandfathers standard companion which he kept for a long time. Maybe outdated but Something is better than nothing he used to say.

The day is not far when Ramamritham and Rajalakshmi find a place in wikipedia. And quite a striking similarity between both of them, both rules ;)

Had read a study on mom and pop stores way back and that explained that come what may, mom and pop stores are here to stay. As the walmarts and carrefours explore the opportunity, the retailers will also find a way to further tweak their business models to suit their business model. After all, Operating cost will be a huge factor for these big players.

@kiwi - A longish response is entirely in character when commenting about Ramamritham !!! Yes, what is Chennai, will also be widely debated.

@Connecter - Its a long awaited move. Only I don't think its going to lead to huge investements, as yet. In India, the price of real estate in relation to other costs is so disproportionate that large format stores will struggle to make money. Every organised retailer in India struggles.

@Vishal - The worry many people have is that mom and pop stores have got decimated in almost every country where organised retail has come. I believe, in India, until real estate prices come into some parity with rest of purchasing power, it will be hugely tough for organised retail, foreign or Indian. Can you imagine a Walmart or Tesco in Bombay or NCR ???

I do not to understand the economies of these huge single brand retail stores in India. I couldn't help staring at the TUMI shop in UB city with a few pieces of whatever luggage they had. Less than 10% of the people in the mall actually bought anything from these stores. And they must be paying a fortune to get a few sq.ft of space there.May be with this economic reform and the 'backend' investment funda,someone would thrive better.

But it is not going to impact good old Rajalakshmi or make anything easier for her...

Indeed. The way to have sold this policy would have been to tom tom the benefits to the cosumer. There are 1 billion consumers and only 1 million retailers. Why shoukd the consumer be willing to put up with anything other than the best. The government should simply mobilise consumer forums to agitate for the measure and say that they are on the side of the consumer.

After the 'successful reverse gear u' by the govt, one wonders whether the Ramamirthams knew this would happen. Looks like the Ramamirthams laid the land mines for their ministers to step right on top of them.

Shades of 'Yes Minister' - or is it giving too much credit to the Ramamirthams?